The Word is Getting Around

Two excellent columns have been written on the Obama administration's decision to trash the Save America's Treasures and Preserve America programs. One late last week appeared in Treehugger written by Lloyd Atler. The other appeared today in the Seattle based publication Crosscut written by Knute Berger.

Both merit reading, linking, and distributing.

Save America's Treasures, Stimulus Spending, and State Data

I'm not smart enough to figure out how to post the data on my website. But I've broken down state-by-state the numbers of jobs that Save America's Treasures has created and compared that with the most recent White House data, state-by-state, on stimulus spending and jobs created.

If you'd like a copy of the data tables just email me at DRypkema@PlaceEconomics.com and I'll send it to you as an attachment.

Time for Reflection

On January 31st the White House announced that the 2011 budget would eliminate all funding for the Save America’s Treasures and the Preserve America programs. The White House blog explained the decision this way:

Cutting Save America’s Treasures and Preserve America grant programs at the National Park Service. Save America’s Treasures program was started to mark the millennium and was supposed to last for two years. Both programs lack rigorous performance metrics and evaluation efforts so the benefits are unclear.

This announcement certainly riled the historic preservation movement including a series of postings on the National Trust’s Forum listserv under the subject line, “It’s Time to Declare War.”

I don’t know if it’s time to declare war or not. But I do know that it is time for preservationists to rethink the progress we thought we had made over the last three decades. And I have to say I’m at the head of the line. Naively I sincerely believed that as we have broadened the definition of the roles that historic preservation plays in society, as we have documented the wide range of positive economic impacts of historic preservation, as we have demonstrated the contribution of historic preservation to Smart Growth, sustainable development, affordable housing, downtown revitalization – that after all of this I thought our message had finally gotten through.

I was wrong.

But the most angering, in fact humiliating part of the White House announcement isn’t that those programs were cut from the budget. These are times when I think it is perfectly legitimate to review every item in the budget for savings…we’ll go bankrupt if we don’t do that. And SAT and Preserve America should have to be defended like any other program.

No, I’m angered and humiliated because historic preservation was used as the poster child for programs deemed not to work.

Remember the second biggest bully on the playground in grade school? Well I remember the day he got beat up by the biggest bully. And what did the second biggest bully do the next day? Picked out the weakest, geekiest, most defenseless kid in the school and beat him up. Why? Because he knew he could get away with it.

That’s what this White House announcement was…they got beat up and so they pick out the perceived 98 pound weakling to slap around.

This announcement had absolutely nothing whatsoever to do with the federal deficit. The rounding errors in the budgeting process are ten times greater than the annual amount spent on these two programs combined. Here’s the analogy. You have a household income of $80,000 per year, but decide “We need to cut back.” So what do you do? Eliminate $0.04 from your monthly expenditures. That’s right…four cents a month of an $80,000 a year income is the equivalent of these cuts.

But it’s not even that. They did not spend an hour pondering the benefits of this program; they picked on the weakest kid on the block to give the illusion they were doing something about the theft from future generations that this deficit represents.

This is absolutely Nixonian in its manipulative hypocrisy. Save America's Treasures supposed to last just two years? Yes, but it was extended because it worked! Too bad the same can’t be said for the stimulus package. Oh, no metrics or performance evaluations? One of the recommendations coming out of Laura Bush’s Preservation Summit was to devise a standardized set of metrics for preservation’s impact. In fact before the end of the last administration, the process of developing those metrics was begun in the Department of Commerce. What’s happened with that in the last 13 months? Absolutely nothing! I guess they’ve been too busy inventing ways to stimulate the economy that have been so measurably successful.

We had to have the stimulus, and Republicans are putting party over country to claim we didn't. But what the money was appropriated for had everything do to with reelecting Democrats and almost nothing to do with good public policy.

Most of the developed countries in the world had a major heritage conservation component in their stimulus packages. Why? jobs, job training, local impact, labor intensity, affects industry most adversely affected, impacts local economies, long term investment, etc. etc. Historic preservation element in the US stimulus plan? $0.

In December the White House announced that so far the $159 billion spent in grants and loans under the stimulus plan had created or saved 640,000 jobs. But make the next calculation -- that works out to $248,000 per job. I want one of those jobs!

The following week Australia released the results of the heritage portion of their stimulus package -- cost per job? $21,818 -- 11 times the cost effectiveness than whatever the hell we're spending the stimulus money on. In other words, for every million dollars spent through the US stimulus programs, around 4 jobs were created. For every million the Australians spent on the heritage portion of their stimulus program, 46 jobs were created.

In contrast to the success stories in a dozen other countries using heritage as part of the stimulus, we have an administration dumping Preserve America and Save America's Treasures. Or you can look at it this way....in 7 hours and 50 minutes the interest (forget paying back the principal) on the stimulus package is more than the combined annual budgets of Save America's Treasures and the Preserve America program.

But beyond that, the people in the White House are way too smart for this to be accidental. This was a very public, very classless slap in the face to Hillary Clinton and Laura Bush, the two first ladies whose programs they were. Hillary is one thing. But when Michelle Obama was getting heat from everywhere about her performance as First Lady, it was Laura Bush who stepped up and defended her. So how does the White House reciprocate? “Here’s the finger, Laura…you and your program as well.”

I blamed the Democrats on the Hill rather than Obama for the idiotic allocations in the Stimulus Bill. I happily crossed party lines to vote for him. But as for this new budget I can no longer give Obama a pass. This was the crassest of political demagoguery but also demonstrates how impotent the preservation movement is seen as being.

And if the White House action were the only bad news we could attribute it to some idiot in OMB who deserves a trip to the woodshed. But in the legislature in Arizona a Republican State senator has introduced a bill to end property tax reductions for historic houses. In Indiana a Republican state legislator is angry because CVS was denied permission to demolish a historic church in her district so she is proposing to emasculate the Indianapolis Preservation Commission. In Missouri, Iowa and elsewhere reducing the effectiveness of state historic tax credits is high on legislative agendas. In Washington the state Main Street program is proposed to be zeroed out. A new city council in Poughkeepsie, New York repealed the historic preservation ordinance just passed by the previous council.

How does the preservation movement react without just being seen as one more group crying, “Yeah, cut the other guys but not us”? I don’t know. But that’s the least of our problems. I don’t think I’m the only one who so significantly misjudged the progress we have made.

We either need to change the mission, change the message or change the messenger.

When I was in grade school I was neither the bully nor the kid that always got picked on. But at least now I know how the second one felt.

Mortgages for Big Macs

OK, this is the last one about the stimulus plan. It's going to pass in some version this week so it's too late for anyone I know to make any difference.

What the hell, I'm not going to live long enough to have to pay any of this money back. But my grandchildren will spend their working lives repaying what Congress is going to appropriate in the next 3 days. I teach a class at Penn where the students are mostly between 23 and 28; my daughter is 34. Their generations should be absolutely outraged at this.

First a set of givens:

1. The world is in economic chaos


2. The "market" is not going to get us out of this. In fact a good case can be made that it was a vastly under-regulated market (and way too many 27 year old MBAs on Wall Street way thinking that actually knew something...and apparently without any adult supervision) that got us into this mess.


3. The federal government is the actor of last resort so has to take the lead.


4. THERE IS NO CASH SITTING IN THE NATIONAL SAVINGS ACCOUNT! So all of this stimulus money is coming from borrowed funds.


5. It is not McCain or even Barack Obama who will have to repay this debt but it will be their children, grandchildren, and in McCain's case great grandchildren.

So if we're going to burden at least two and probably three generations to pay for this, the money ought to be spent for long term assets, so at least they get some use out of what they are paying for.

And Obama's words seemed to suggest that was going to be the case - infrastructure, building weatherization, rebuilding schools, etc.

The poor guy just got torpedoed by Nancy Pelosi and her myopic, self-serving colleagues in the House of Representatives.

Here's my back-of-the-envelope calculations:

57.8% of the money is going to be spent on operating expenses and cash distributions, the impact of which will be entirely in the next 12 months.

Another 14.8% will be spend on short term assets -- those that have a life of 5 years or less.

17.4% of the money will go towards assets with a useful life of between 5 and 20 years.

Leaving only 10% of all that money invested in long-term assets.

Put it another way, 90% of what the money is being spent for will be entirely gone while 70% of the bill will yet to be paid. This is exactly the same as buying and consuming a Big Mac, but financing it with a 40 year mortgage.

If I were the age of my daughter I'd start an impeachment campaign for every member of Congress in both parties in both houses.

And lest you think the Republicans are any better than the Democrats - absolutely not! The only answers they have are "No" or "Tax Cuts". And they say, "Let's cut taxes, and give the money back to taxpayers...afterall it's their money". Bullshit! You're giving me a tax refund that my grandchildren will have to pay.

And speaking of the litiny of bullshit that all of them are using:

"Create or save" 4 million jobs. Both Obama and Arlen Specter one of the three Republicans who supported the "compromise" in the Senate used that phrase. "Create 4 million jobs" is one thing. How many jobs exist now? How many exist in a couple of years? Is it more or less than 4 million more jobs? That, at least, can be measured. But "save jobs"? Rhetorical nonsense. There is no way to demonstrate that. In three years there could be no more jobs than today and one could still say, "Yeah, but I saved 4 million jobs" and there is no way to disprove it.

And what it a "job" anyway? I'll tell you what is being used. Various econometric multipliers that calculate jobs based on output..."how many jobs are created when $1 Million is spent building a highway" for example. But look at the fine print. A "job" is defined as one full time equivilant job for one year. So let's say a guy who finishes concrete is now going to have a job building highways for the next 4 years. That's not one job. That is 4 jobs!

And, speaking of highways, here was a once in a generation opportunity to shift from our sprawl inducing, environmentally disasterous, health impairing, overdependence on cars, and shift to enhancing public transportation, particularly rail. And that's what Obama sounded like he wanted to do. Instead the amount going to highways is 10 times what is going to rails and public transportation. It ought to be the other way around.

I'm all for using tax credits. We should give tax credits for people to wean themselves from so much automobile dependence. Even a 15% reduction in automobile miles traveled would have an incredible impact on air quality, commuting times, and fuel consumption. Instead, the idiots in the Senate added a tax incentive for buying another car!.

Dean Michael Lykoudis of the architecture school at Notre Dame had what I though was an excellent suggestion. He pointed out that at the beginning of World War II in six months time the US automakers shifted their entire production facilities from making cars to making tanks and other equipment to fight the war. If we're insisting on helping General Motors, argues Lykoudis, then say, "We'll help you retool to make passenger rail cars, subway cars, and other mass transit vehicles." Great idea.

The Republicans are saying, "This is too much". The reality is, no one knows. The issue is not the size of the stimulus but its composition. It is almost all very short term expenditures with no lasting impact at all. And it sure as hell isn't sustainable development by any measure.

Poor Obama came to the White House genuinely believing, I think, that he could change how Washington worked. But this stimulus package is exactly how Washington has worked (or rather why it hasn't worked) in the past - no set of underlying principles; pandering to constituencies; hanging Christmas tree ornaments on every spending bill; thinking not a day past the next election.

We have to have a stimulus bill.

The stimulus bill that is about to pass is irresponsible, myopic, selfish, vote-buying, self-serving and reprehensible. It is a gigantic "screw the next generations" piece of legislation. Our grandchildren will rightfully curse this Congress and us for electing them.

Not only are the French smarter, so are the Norwegians

Earlier this week I wrote about the incorporation of $132 million a year for the next four years for the restoration of historic buildings in France. That was a specific part of President Sarkozy's economic stimulus plan for France. Like the US, France is suffering its most severe recession since the end of World War II.

This morning I get an email from my friend Terje Nypan who is in the Culture Ministry of Norway. Much of the national budget in Norway is dependent on oil. So when the oil price drops from $140 per barrel to $40, it obviously has a big impact.

So the Norwegian government has adopted what they call their "Crisis Package" in the amount of about $685 million dollars. (If that number seems low compared to the $780 Billion stimulus package here, remember that the population of Norway is around 4.6 million versus 304 million for the US. )

But unlike the United States where the only criteria to make the bill seems to be having a friend on the House Appropriations Committee, in Norway they actually had a set of principles upon which their decisions were based. And here they are:

• The measures must have a speedy effect on the labor market
• The measures must have specific target objectives
• The measures must be limited in time
• The measures shall strengthen the Government in its policies for the environment and income distribution.

I happen to think this is an excellent set of principles. But others could have a different list. The trouble in the US is that there is no set of principles upon which we are encumbering 3 generations to repay.

And how did Norway commit their stimulus money to be consistent with these principles?

• Measures for increased energy efficiency $183,529,000
• Repair and development of railway system $198,976,000
• CO2 cleaning $147,129,000
• Footpaths/sidewalks and bicycle roads $ 76,471,000
• Nature management and Cultural Heritage $ 52,000,000
• Environment research on sea wind turbines $ 11,471,000
• Charging stations for electric cars $ 7,647,000
• Bio Energy $ 7,647,000

The Cultural Heritage portion of that was around $34,000,000 and was divided as follows:

• Rehabilitation and maintenance of privately owned, protected property $11.6 Million
• Technical and industrial heritage, vessels and centers $6.9 Million
• Rock art, archeology, and universal access $3.8 Million
• Fire safety for historic wood buildings, medieval and important churches $11.8 Million

Why did they do this? Because they learned in the last recession that: a) it worked putting people back to work and training workers for the future; and b) it met the principles they established.

Virtually all the line items in the Norwegian stimulus package are long term investments. Almost none in the US stimulus package are.

One more blog about the stimulus package then I'll let it go. What the hell, I'll never live long enough to have to repay any of it.

Why the French are Smarter than us Americans

Yeah, we have to have a stimulus plan. And one will pass this week. The latest iteration is the one crafted by a moderate Republican (Susan Collins of Maine) and a moderate Democrat (Ben Nelson of Nebraska). And as a militant moderate myself, I have to commend them for at least making some adjustments to the bottomless barrel of pork written by the Democrats in the House and the equally irresponsible "just say no" or "just say more tax cuts" approach by the Republicans.

In this morning's Washington Post Senator Arlen Specter, one of the three Republicans likely to vote for this latest version, said that the $780 Billion Dollar package would create or save 4 million jobs. (As an aside "create or save" used by both Specter and President Obama is bullshit...why? It means you have already defined success for yourself. If not a single new job is created you can still say, "Yeah, but I saved 4 million jobs" and it's impossible to disprove that.)

But bullshit aside, make the calculation. $780 Billion divided by 4 million jobs equals $195,000 per job.

Now France has as big a case of economic chaos as we do. Their economy shrunk last year the most since World War II and their unemployment is expected to reach nearly 11%.

So, of course, President Sarkozy had to introduce his own economic stimulus plan. But here's a big piece of his approach - committing 100 million extra Euros per year ($130 million) for the restoration of historic monuments in France for the next 4 years. So about 1.5% of his stimulus package is going toward heritage conservation. By the way Sarkozy isn't the only one. In March there is going to be a hearing in Brussels of the European Union on using heritage conservation as a counter-cyclical economic development strategy.

So what if we took this approach as part of our stimulus plan? Of course in the US we are much more likely to use tax incentives to attract private investment rather than direct public funding. And we've done this effectively with the Historic Rehabilitation Tax Credit.

So let's double the tax credit for the next 4 years (from 20% to 40%) and let's assume that costs the US taxpayers the annual equivalent of $130 million per year. What would that mean? Nearly 20,000 jobs per year for each of the next 4 years. (Also, by the way, when economists and politicians say "job" they mean one full time job for one year. So if a stimulus package creates one job in the highway building business, for example, that lasts for the next four years, that will be counted as 4 jobs).

The cost to the US taxpayer of historic preservation as stimulus? $6875 dollars per job...for the same amount of money that is required to create 1 job in the rest of the stimulus package, 28 jobs would be created. And this would represent less than 1/10 of 1% of the stimulus spending, not France's 1.5%.

Furthermore, this is Sustainable Economic Development! A tax credit to encourage Americans to buy even more cars isn't.

France might not produce the best armies, but they are better at wine, better at cheese, and sure as hell better at figuring out a stimulus plan than we are.

The Magnitude of Numbers and the Stimulus Plan

Some people learn through words. Some people learn through pictures. Some people learn through numbers. I'm a numbers guy.

But big numbers, really big numbers, often lose their significance because we just can't comprehend that many zeros.

And that's what's happening with the stimulus plan(s). They will end up being $2 trillion (that's trillion with a T) before we're done. The first components were the $150 billion tax rebate last spring and then the $750 billion bailout from October. In the next week or so Obama will introduce his $775 billion program and there will be more before we're done. So let's just say $2 trillion.

How much is $2 trillion dollars? Well it would be enough to have paid for:

• the man on the moon project, plus
• the entire Interstate highway system, plus
  
• the Vietnam War, plus
• the first Gulf War, plus
• the entire budget for the United Nations for the next ten years, plus
• all the tax act historic preservation projects of the last 15 years, plus
• the entire Gross Domestic Product of Canada

and there would still be enough left over to pay this year's room, board and tuition for every college student in America.

So a bit of money.

Saturday President-elect Obama said that his stimulus plan would create 3.7 million jobs. It's going to cost $775 billion. But here's the calculation he didn't make. That works out to around $209,000 per job created. I want one of those jobs!

Now don't get me wrong, the stimulus plan is crucial. But let me make a small comparison. There's already a stimulus in the US tax code. It is a tax credit for the rehabilitation of historic buildings -- to "stimulate" private capital to invest in heritage resources. And like any stimulus program it has a cost -- $6,873 per job created.

Let me see....a financial stimulus for $209,000 per job or one for $6,900 per job. Which is giving the taxpayer the biggest return?

Or we could put that in slightly different terms. Based on the Obama figures every $1 million spent in his stimulus plan creates around five jobs. Every million that the historic rehabilitation tax credit costs creates around 145 jobs. I'd like to say "you do the math" but I've already done the math.

The stimulus plan is necessary, but please understand these two things: 1) 100% of the stimulus is coming from borrowed money, and 2) if you have a child or a grandchild who is 5 years old today, they will spend their entire working life paying off this bill.

So it sure as hell better be well spent.